LEGAL | Staff Reporter, Australia

Pizza Hut franchisee fined after engaging in ‘sham contracting'

The franchisee was penalised a total of $216,700.

A Pizza Hut franchisee on the Gold Coast was fined after exploiting an Indian delivery driver under a sham contract and using false records to hide the irregularities.

Dong Zhao, owner and operator of the Pizza Hut franchise outlet at Upper Coomera, has been penalised $36,700 while his company Skyter Trade Pty Ltd has been penalised an additional $180,000.

The penalties were imposed in the Federal Circuit Court and were the result of legal action by the Fair Work Ombudsman. Judge Michael Jarrett imposed the penalties after Zhao and his company admitted that they contravened sham contracting laws when they misrepresented to a delivery driver that he was an independent contractor and not an employee.

The delivery driver is an Indian national aged in his 20s, was in Australia as a dependent on his wife’s international student visa at the time. Zhao reportedly asked the driver to provide an Australian Business Number (ABN) and subsequently treated him as an independent contractor between November 2015 and May 2016, paying him a flat rate of no more than $16 an hour.

Under the Pizza Hut enterprise agreement that applied to the business, however, the worker was entitled to receive at least $20.36 for ordinary hours and up to $40.72 for overtime and public holiday work as an employee rather than an independent contractor.

The Fair Work Ombudsman formed the view that the driver was an genuine employee of Zhao’s company, rather than an independent contractor, due to the “level of direction, supervision and control Zhao and his company had over the driver – and because the driver was not genuinely operating his own delivery business.”

The driver, who was also underpaid a per-delivery entitlement, superannuation and a uniform allowance, has since been back-paid in full.

Inspectors from the Fair Work Ombudsman investigated Zhao’s Pizza Hut outlet in 2016 as part of an activity that involved audits of more than 30 Pizza Hut outlets and identified widespread non-compliance in the franchise network.

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